Mobile Banking: The Impact of M-Pesa in Kenya

M-Pesa is a mobile phone based money transfer system in Kenya which grew at a blistering pace following its inception in 2007. We examine how M-Pesa is used as well as its economic impacts. Analyzing data from two waves of individual data on financial access in Kenya, we find that increased use of M-Pesa lowers the propensity of people to use informal savings mechanisms such as ROSCAS, but raises the probability of their being banked. Using aggregate data, we calculate the velocity of M-Pesa at between 11.0 and 14.6 person-to-person transfers per month. In addition, we find that M-Pesa causes decreases in the prices of competing money transfer services such as Western Union. While we find little evidence that people use their M-Pesa accounts as a place to store wealth, our results suggest that M-Pesa improves individual outcomes by promoting banking and increasing transfers.

Mbiti and Weil (2011)


National.Fixed and random effects estimation using panel data.Availability of mobile moves service.The primary use of M-Pesa is the purchase of airtime - 42 percent of users. Contradictory to findings by Jack and Suri (2011) they find that only 26 percent of M-Pesa users report using the service for savings. Very small percentages of users report using M-Pesa for direct purchasing, paying bills or receiving salaries or wages. M-Pesa users are more likely to be male, wealthier, better educated, banked in the formal sector, employed in non-farm sectors and reside in urban areas. 35% of banked individuals use M-Pesa to save, compared to only 19% of the unbanked that use it as a savings tool. Wealthy individuals also more frequently use M-Pesa as a savings tool - 30% - as compared to poor individuals at 15%. Men use M-Pesa 35% more frequently than women. 35% of respondents indicated that they had increased the frequency of sending transfers and 18% indicating that they had decreased the frequency. Approximately 35% of M-Pesa users indicated that they had sent higher amounts in the transfers they had made and almost 20% stated they had decreased the amount. Positive relationship between M-Pesa adoption and the frequency of sending transfers. M-Pesa adoption increased the frequency of sending remittances by 2. household data from two nationally representative surveys conducted in 190 sublocations (i.e., clusters of 2-3 villages).